DOE changes rules on vetting LNG export projects

WASHINGTON — The Energy Department on Thursday upended the way it vets proposals to export liquefied natural gas, formally implementing a new approach that gives an advantage to projects that have completed an expensive environmental review.

With a rule set to be published in the Federal Register on Friday, the Energy Department largely codified the process it first proposed in May, promising that it would mean swift decisions on LNG export projects that have undergone those legally required environmental analyses.

“One of the overriding purposes of the procedural changes . . . is to enable prompt action on applications that are ready for final decision,” said Christopher Smith, the principal deputy assistant secretary for fossil energy.

But the benefits of the change extend unevenly to the dozens of companies now vying to export U.S. natural gas to Japan, China and other countries clamoring for lower-cost supplies of the fossil fuel. And some industry representatives say the new process will exacerbate permitting delays, limiting the ability of U.S. gas producers and liquefaction facilities to compete for customers around the world.

The new approach affects proposals to export natural gas to countries that do not have free trade agreements with the United States. While the Energy Department is still responsible for evaluating whether those proposed exports are in the public interest, it will no longer consider those applications in first-come, first-served order.

Instead, the department will begin evaluating applications 30 days after proposed export facilities have been scrutinized under the National Environmental Policy Act, with release of a final environmental impact statement or environmental assessment.

The Federal Energy Regulatory Commission generally oversees that environmental process for facilities located or planned in state waters or onshore. The Maritime Administration oversees the reviews for other offshore export facilities.

The biggest winner under the new approach is Houston-based Cheniere Energy, which plans to add liquefaction capacity to its Sabine Pass terminal now under construction in Louisiana. Although Cheniere’s expansion proposal already won required construction permits from the Federal Energy Regulatory Commission, it faced a nearly two-year wait for the required Energy Department review under the government’s previous approach. Now, the proposed Sabine Pass expansion joins just two other projects ready for final action at the Energy Department: Sempra Energy’s Cameron LNG project in Hackberry, La., and the Freeport LNG facility planned at Quintana Island, Texas.

Another beneficiary is Exxon Mobil Corp.‘s Golden Pass project in southeast Texas, just across the border from Cheniere’s plant. Golden Pass also was far down the Energy Department’s list, even though it is well into the FERC review.

The Energy Department rebuffed industry calls to create a uniform deadline for issuing final decisions once required environmental reviews are complete. Smith said individual applications contain unique details and some may require more time to evaluate.

He also suggested that the Energy Department’s staffing and resources could be a limitation. If final environmental reviews for several projects were completed at or around the same time, he said, “compliance with a fixed deadline may be unworkable.”

Bill Cooper, president of the Center for Liquefied Natural Gas, said that without a deadline for final action, the Energy Department’s new approach doesn’t give aspiring exporters the regulatory certainty they need.

“For projects that meet the requirements under NEPA, the Department of Energy should set a timeline as to when it issues the final decisions,” Cooper said in a statement. “When developers have already faced a lengthy waiting period for a conditional approval and completed the FERC process, continued regulatory uncertainty is not beneficial.”

The Energy Department no longer will issue conditional export licenses but will honor the ones it already has granted for seven projects.

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